This is part II of our series on how to sue a Chinese company. This series of posts addresses what to do should you want to seek redress against a Chinese company that owes you money or has wronged you. It is based on an article I recently had published (along with one of my law firm's new associates, Rebecca Carlson) in Bloomberg Law Reports?[one week trial subscription required] and on an article I wrote for the Wall Street Journal, entitled," Chinese Companies Court Disaster."?Please note that instead of using footnotes, this post use brackets, [], instead.
Part I focused on how to effect service of process on a Chinese company pursuant to the Hague Convention and on the jurisdictional issues involved in suing a Chinese company. This part II focuses on how to conduct discovery against a Chinese company. ?
Discovery
Once a U.S. company succeeds in serving a Chinese?company in a U.S. lawsuit, discovery can begin.?Because the Chinese company is now party to a U.S.?lawsuit, it is technically bound by normal discovery?rules. However, discovery in China can be difficult.?Apart from the restrictions placed on discovery by?the Chinese government, Chinese companies are?not accustomed to U.S.‐style discovery, and they?often consider compliance to be optional.
Deposition Discovery
China prohibits even voluntary depositions from?being taken on its soil. In its declaration on?accession to the Hague Convention on the Taking of?Evidence Abroad in Civil and Commercial Matters,?China stated it did not consider itself bound by?Articles 16‐22 of the Convention, portions of which?would grant consular officers the right to oversee?depositions. In 1989, China permitted a limited?deposition in the matter before the U.S. District?Court for the Northern District of California. U.S. v.?Leung Tak Lun, et al., 944 F.2d 642 (9th Cir. 1991).?However, China advised the United States that the?particular grant of authority for that deposition?should not be regarded as a precedent. Indeed,?there is no subsequent record of China permitting a?deposition. At worst, conducting a deposition in?China may lead to arrest, detention, or expulsion.
Instead, the best way to depose a China‐based?witness is for the witness to come to the United?States. However, if the witness is unable or?unwilling to do so, there are several additional?options available. One common method is to fly the?potential deponent to Hong Kong or to a neighboring country and conduct the deposition?there, either in person or telephonically from the?United States. [telephonic depositions require court approval?from the U.S. court under Federal Rule of Civil Procedure?30(b)(4)]?Another possibility is to conduct a?telephonic deposition of the witness in China. But?because even a telephonic deposition technically?occurs entirely within China, it almost certainly?runs afoul of China's prohibition.
Document Discovery
Under the Hague Convention on Evidence, China?has agreed to allow some limited discovery of?documents. Articles 1 and 2 of that Convention?provide for document discovery by means of a?Letter of Request issued by the court where the?action is pending and transmitted to the "Central?Authority" of the jurisdiction where the discovery is?located. The Central Authority is then responsible?for transmitting the request to the appropriate?judicial body for a response. However, Article 23?permits a signatory country to "declare that it will?not execute Letters of Request issued for the?purpose of obtaining pre‐trial discovery of?documents as known in Common Law countries."?China has executed such a declaration and,?therefore, document discovery for trial purposes is?permissible. The "fishing expedition" discovery for?which the United States has become known,?however, is not.
Yet even for the document discovery authorized in?China, it is unlikely that the Chinese Central?Authority will instruct a Chinese court to compel?production. The U.S. State Department made the?following accurate summary of how China tends to?respond to U.S. court document discovery requests:
While it is possible to request compulsion of?evidence in China pursuant to a letter?rogatory or letter of request (Hague?Evidence Convention), such requests have?not been particularly successful in the past.?Requests may take more than a year to?execute. It is not unusual for no reply to be?received or after considerable time has?elapsed, for Chinese authorities to request?clarification from the American court with?no indication that the request will?eventually be executed. See?"China Judicial Assistance" by the U.S.?Department of State.?
Part III of this series will focus on litigation strategies when suing a Chinese company and enforcing U.S. judgments against such companies. Part IV will discuss arbitrating against Chinese companies and suing them in China.
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